Cummings & Lockwood
Photo

IRC 754 Elections for Tax Counsel: Mastering Structuring Considerations of Basis Adjustments

Home Email Page Print Page

Navigating Complex Basis Rules and Avoiding Pitfalls in Section 754 Elections

May 31, 2016

Janice H. Eiseman, a Principal in our Stamford office and Professor Bradley T. Borden, Professor of Law at Brooklyn Law School will be hosting a live, 90-minute CLE/CPE Webinar for Stafford Publications, Inc. entitled "IRC 754 Elections for Tax Counsel:  Mastering Structuring Considerations of Basis Adjustments" on Tuesday, May 31, 2016 from 1:00 p.m. - 2:30 p.m. EDT.  For more information and how to register click here.

This CLE/CPE webinar will provide tax counsel with comprehensive guidance on the 754 election for partnerships. The panel will discuss the basis adjustment rules associated with sales, transfers and partnership interests or property distributions; review the impact of the Section 754 election for individual partners and the partnership; and discuss structuring transactions to avoid unintended tax consequences.

Description

Understanding the Section 754 election and its related basis adjustments is a critical skill for tax counsel serving as advisers to clients owning or managing partnerships. The election allows adjustments on the “inside basis” of assets the partnership owns.

The basis adjustment can have a significant impact when a partnership has an existing 754 election and admits a new partner, has one partner sell a partnership interest, or when the partnership makes a distribution to a partner. The election and adjustments can have different impacts on different partners, so tax advisers need to fully grasp the tax implications of making the election, and utilizing the optional basis adjustments.

Tax advisers must not only understand the rules but also the practical calculations, allocations and reporting mechanics of the 754 election, and especially of the Section 734(b) basis adjustments. Failure to understand the “moving pieces” of the optional basis adjustments under Section 734 can result in unnecessary tax issues for the individual partners—some of whom might be your clients. Counsel may be called upon to help make important decisions with basis and depreciation issues, and to help make complicated adjustment calculations.

Listen as our authoritative panel of tax advisers guides counsel through the basis adjustment rules, discusses the impact of the Section 754 election on individual partners and the partnership, and provides best practices for avoiding potential pitfalls of the election.

Outline

  1. The mechanics of a Section 754 election
  2. Inside and outside basis issues
  3. Ability to make 754 election due to a transfer
  4. What happens under 743(b) when a 754 election is made?
  5. 755 basis adjustments
  6. Partnership technical terminations
  7. Adjustments to basis of a corporate partner’s stock
  8. Contingent liabilities and allocations of basis adjustments
  9. Benefits

Benefits

The panel will review these and other important issues:

  • Mechanics of making a Section 754 election at partnership level and understanding “inside basis” vs. “outside basis”
  • What are the benefits and disadvantages of making the 754 basis election?
  • What are the rules governing step-up and step-down basis adjustments?
  • What are the rules for allocating basis adjustments?
  • What is the impact of the 754 election on individual partners and the partnership?
  • What are common pitfalls in basis adjustments, and what can practitioners do to avoid these pitfalls?

Learning Objectives

After completing this course, you will know the basis adjustments, both mandatory and optional, that accompany a Section 754 election. You will know how specific basis adjustments accompanying a 754 election impact existing partners, and will understand the ordering rules in allocating the adjustments. You will have detailed knowledge on planning and strategic considerations on determining whether to make a 754 election.